July inflation drops marginally to 6.87%

The annual rate of inflation, based on monthly WPI, stood at 6.87% (Provisional) for the month of July, 2012 (over July, 2011) as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year.

Build up inflation in the financial year so far was 2.36% compared to a build up of 3.14% in the corresponding period of the previous year.

Analysts were largely expecting inflation to come in at 7.25%.

The index for this major group rose by 1.1 percent to 218.8 (Provisional) from 216.4 (Provisional) for the previous month. The groups and items for which the index showed variations during the month are as follows:-

The index for 'Food Articles' group rose by 1.4 percent to 212.2 (Provisional) from 209.2 (Provisional) for the previous month due to higher prices of gram (10%), arhar (8%), bajra (7%), moong (6%), ragi (5%), urad and fish-marine (5% each), coffee and condiments & spices (4% each),masur and rice (3% each), egg, maize and milk (2% each) and fish-inland, barley and wheat (1% each). However, the prices of poultry chicken (5%), tea (4 %), jowar (2%) and fruits & vegetables (1%) declined.

The index for this major group declined by 1.5 percent to 175.5 (Provisional) from 178.2 (Provisional) for the previous month due to lower prices of light diesel oil (10%), furance oil (8%), naphtha (7%), aviation turbine fuel (ATF) and petrol (4% each).

The WPI inflation data remains a vital input for the RBI in determining its policy act, especially in cutting repo rates. A high inflation restricts the RBI's ability to cut rates, which in turn keeps interest rates high and economic growth low.

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